The government clashed with business as costs rose as soon as Croatia replaced its kuna currency with the euro. Traders rounded up prices in the new currency, prompting the government to warn traders it would introduce fines, cancel energy subsidies or raise taxes if they did not return prices back to pre-euro levels. Vujcic said one-off hikes did indeed happen, particularly in the services sector, but the actual impact was rather modest. "This was as expected and was not large, probably around 0.3 to 0.4 percentage points, one-off effect," Vujcic told Reuters. "This is very much in line with the findings in all other countries that have introduced the euro." A host of studies have mostly put the one-off inflation impact of euro accession at 0.1% to 0.4% but most changeovers happened in a low inflation environment, when sneaking in an extra price increase was more difficult.
At 12.5%, Croatia had one of the highest inflation rates in the 20-nation euro zone last month, and compared to the previous month, prices rose 0.2% while the euro zone as a whole recorded a 0.4% drop.
Click here for a broader Reuters interview with Vujcic. (Reporting by Balazs Koranyi; Editing by Susan Fenton)
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